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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

Two have moved out of the area for different jobs and hired a property management firm to rent the houses out. I doubt either can be rented for anywhere near the mortgage payment, but both have reasonably high paying jobs and may still come back to the Seattle area, so it works out as a temporary situation for the next few years if/when they move back.

One is stuck in a divorce and is nearly $100K underwater and has been attempting to complete a short sale for over a year. This person also has a high paying job and would not be trying to sell if it weren’t for the divorce. Sadly, the banks are not making it easy. Paperwork is often forgotten and requires multiple calls to pester them into action. Usually the deal falls through after several months of waiting for the bank to do something.

Another purchased a modest condo in Seattle and is likely 20-30% underwater, but has the means to keep paying and no real reason to leave.

Finally, I have a friend who purchased a condo in South King County which has lost over 40% of its value. He is likely over $150K underwater and at the threshold for where it might just be best to walk away. Apartments in the same complex rent out for less than half of his mortgage payment. However, at this point he is likely too proud to declare bankruptcy and has very strong moral feelings of obligation to pay back his loan.

So the prevailing theme I am seeing is people are “stuck” and (for now) are content with the situation, no matter how precarious it may actually be.

Let’s say that in 2005, to 2007 we had double digit price increases, and let’s say that the market place has given up 30% of that appreciation. Let’s say we are back to 2004, or 2005 pricing.

Well we built millions of housing units in that time of 2005 to 2007. We built condos, did conversions, built thousands of units in South Everett, Puyallup, Burien, Renton, Bellevue, and Seattle. We built every square inch we could, and are just finishing up some projects now.

In that same period we didn’t build rental units. Every friggin builder on earth was selling units for quick cash. Those mortgages were being sold to the securities market as fast as they were generated.

By the law of supply, and demand that some people here keep quoting we should be seeing massive price reduction. By virtue of the number of foreclosures, short sales, and REOs we should be seeing massive price reduction. All we got to prop up prices were historically low interest rates, which to me is kind of the same thing as a 0 down financing scam, and a government give away of tax dollars in a tax credit.

So prices have remained the same, there is talk of the prices going up? and what we are comparing to was a complete apparition in the market place of two, or three years.

The macro economics are worse than ever, and yet people are buying the family home without any regard for it’s value, because they claim “it’s not an investment.”

Well if it’s not an investment, then really what is the point? It seems to me the way things are going every one who bought will be able to sell, and come out at least close to evens, like Meshugy (sp?).

The walkaway days of California, Nevada, and Florida are LONG gone. Nobody “walks away” ….Public has gotten too saavy for that….They stay for FREE and make the Investors force them out on THEIR terms..

Jingle keys (or jingle mail) was always incredibly stupid. Even the name indicates whoever came up with the idea didn’t have a clue what was going on.

This is by far the best value I have seen in a property in a very long time. It is solidly built on a South West exposure corner lot. It has been on the market for 254 days. In my opinion it sits there because agents don’t sell value, they are selling a dream.

Perhaps the ones that feel stuck aren’t familiar with the term “non-recourse”.

Virtually no notes are non-recourse in Washington. What you’re thinking of is that if there’s a non-judicial foreclosure, the creditor cannot ordinarily collect a deficiency on a typical residential transaction.

Perhaps the ones that feel stuck aren’t familiar with the term “non-recourse”.

Virtually no notes are non-recourse in Washington. What you’re thinking of is that if there’s a non-judicial foreclosure, the creditor cannot ordinarily collect a deficiency on a typical residential transaction.

True, but what is the ratio of judicial to non-judicial foreclosures in this state?

This is by far the best value I have seen in a property in a very long time. It is solidly built on a South West exposure corner lot. It has been on the market for 254 days. In my opinion it sits there because agents don’t sell value, they are selling a dream.

So you think this 72 year old sort-of-renovated average looking place (with an–oooh–gazebo in the back yard) is worth nearly HALF A MILLION DOLLARS?? Really? A good deal?

I disagree. I know everybody here is all about the monthly payments and price to income ratio, so I’m clearly the odd person out–but there is no way I’m looking at that tired granny shack and thinking “Half a million bucks, what a deal!”

30 years down the line I’m going to be pig happy I didn’t sink three decades of income into that thing. Hell, I’m happy now.

You people throw around hundreds of thousands of dollars around like bagged confetti. Something about the whole business of real estate makes people immune to the fact that half a million dollars–or more like a million by the time the mortgage is paid off–is a vastly huge quantity of money.

And there is no way that 1940’s cottage is worth a vastly huge quantity of money.

Even the most sensible people on this website are insensible when it comes to real estate *value*.

BTW its VERY easy for others to spend money that is NOT theres…Therefore you NEVER weight heavily anyones opinion on whether or not you are getting a “good deal.” Especially someone with a vested interest in you making 1 decision or another…. You should know it yourself………………or…………….I’m here to tell you…………………….Its NOT a good deal…

Perhaps the ones that feel stuck aren’t familiar with the term “non-recourse”.

Virtually no notes are non-recourse in Washington. What you’re thinking of is that if there’s a non-judicial foreclosure, the creditor cannot ordinarily collect a deficiency on a typical residential transaction.

True, but what is the ratio of judicial to non-judicial foreclosures in this state?

Probably 99% non-judicial. That’s not the number you need to look at, however. If the value of the property is suspect, I’d be concerned if the borrower’s net income or net worth were possibly attractive to the lender. But beyond just getting the terminology right, the point is to not be in the minority group, and end up facing a judicial foreclosure. It’s possible though that if that happens, you could reverse your decision and cure the default.

These are all issues someone should discuss with an attorney who represents them, as opposed to making a decision by reading things off the Internet.

One more thing. There may be tax consequences to the non-judicial, so those would need to be addressed too. If the note truly were non-recourse, I don’t think this (or most of the rest) would be a concern.

Go to the house, go to the second floor, and jump. You’ll find it’s as solid as a rock. Go into the basement and look up. Some one had money when that shack was build. It sits on a prime South West exposure lot, but all you are looking at is the gazebo.

The electrical was up dated, but not the plumbing. It could use, and stand a second or third bathroom. The aluminum siding probably covers the original which must be in good shape for being covered after about twenty years of wear. I personally would buy it to live in, and over time expand on it, or not, to raise a family. It’s a good value, not a screaming deal.

You could also make an offer, which would be my ultimate point. People complain that there is no inventory. There are multiple offers on crap properties, and this one sits for 254 days.

If you read my comments I think everything is over priced, except for this. I’d endorse this property over hundreds of others that I have looked at since last seeing this property about a year ago.

RE:gardener1 @ 17 – Without talking about a particular listing, there’s nothing wrong with a house being over 50 years old if it was properly maintained and even updated. A property could in fact be more valuable because of it’s age.

I have no vested interest in saying what is, or is not a good value. No one here, or anywhere for that matter is going to pay me for my opinion about a property. That’s not where the money is. That’s not how it works.

You talk about investment properties. That is a totally subjective opinion. I’m just expressing opinions. That’s free.

Good for you. I hope it was in writing. I did note that the listing does indicate that the owner approved both Internet advertising (default choice) and blogging (non-default choice). Ironically though, the latter doesn’t apply to your post, as I read the rule, because this isn’t your site.

I thought it was interesting that Tim didn’t have a Real Estate license so he skirts the rules on publishing listings. I sent my license back to Olympia for a long time on that premise, just so I could blog about listings.

I thought it was interesting that Tim didn’t have a Real Estate license so he skirts the rules on publishing listings. I sent my license back to Olympia for a long time on that premise, just so I could blog about listings.

Then I realized this is the internet, you can’t stop it.

A lot of the rules are rather poorly written. Even worse though are some of the decisions. They’ll cite to a rule which seemingly has absolutely no application to prohibit an action, so they effectively use the poorly written language to support the decision they want to make.

You are licensed now right? Through Skyway? Although the NWMLS cannot stop the Internet, they can fine the agents who are members (and/or their designated brokers).

Perhaps the ones that feel stuck aren’t familiar with the term “non-recourse”.

These are all issues someone should discuss with an attorney who represents them, as opposed to making a decision by reading things off the Internet.

One more thing. There may be tax consequences to the non-judicial, so those would need to be addressed too. If the note truly were non-recourse, I don’t think this (or most of the rest) would be a concern.

Couldn’t agree more about consulting an attorney before beginning a mortgage default.

Now I’m not an attorney, (nor do I play one on TV) but is it true in Washington in a non-judicial foreclosure if the lender takes back the house isn’t it accepting that as the sole cure for the default, i.e there is no debt foregiveness?

RE:badpelican @ 29 – I’m not 100% certain, but I think the amount of debt forgiveness would depend on what they bid. So if $250,000 is owed and they bid $200,000, I think there’s $50,000 of debt forgiveness.

Also, to the extent they bid $250,000, that would probably count as an ordinary sale transaction. Thus if you had someone with a very low basis from the very old carryover rules, they might have gain on the sale as simply a sale transaction. Hopefully that would be a situation where the normal $250k/$500k exclusion rules would apply.

Again though, not an area I ever practiced in, so I’m not up on the nuts and bolts, which is what this is.

RE:badpelican @ 29 – I wonder in a foreclosure where the bank bids the amount owed in a public auction that there would be any debt forgiving needed? I am assuming that there is only a first mortgage. One, they are forcing the property in lieu of the debt into a public auction and , two, their bid is what they pay for the home unless someone else outbids their minimum bid. If they take back the home because no one else bids over their opening bid one can argue that prevents others from buying it cheaper and are thus essentially paying the price of their bid which wipes out the debt. Say you own a house that you owe the bank $300,000 on the first mortgage. With costs added the bank sets an opening bid of $350,000. No one bids and the bank gets a REO. They are essentially buying the house at their bid price thus eliminating all of the debt and fees owed. Their bid prevents anyone from paying $349,000 which would cover the debt owed. If someone else bids $450,000 the mortgage and expenses would be covered and the homeowner would actually get some money back if it were not for all the fees and legal expenses that would suddenly be added to the pile of expenses magically.

It really has more to do with the agreements signed at time of purchase, than how the bank “bids it” at time of sale. The difference between a Judical and non-Judicial foreclosure is that the buyer signed a Deed of Trust at time of purchase. This makes it unnecessary for the bank to proceed via a Judicial Process, and makes it automatic that the lender can proceed to Trustee Sale (non-judicial foreclosure process) when the owner is 4 months behind in their payments.

The trade off for the stream lined process of moving forward on the delinquent homeowner is the agreement to take what they get and forgive the difference. “What they get” has nothing to do with the bid at the Trustee Sale. What they take it back for is of no consequence. What they get is determined by either a 3rd party purchaser buying it at the Trustee Sale or what the lender eventually gets as an REO sale.

Not all States have buyers sign Deeds of Trust at time of purchase. East Coast generally does not, West Coast does. That is what establishes the lien holder’s right to proceed via a non-judicial foreclosure in a more speedy fashion. If the buyer did not sign a Deed of Trust at time of purchase, the lien holder can not do a non-judicial foreclosure.

When I first came to the West Coast back in 1998, I asked why anyone would sign a Deed of Trust allowing the bank to proceed to sell their home with 4 months behind in payments vs a judicial process. The answer was…because the bank agrees to no recourse if they do. If the bank has recourse…there would be no reason for any home buyer to sign a Deed of Trust in addition to the Promissory Note at time of purchase. The deal in that Deed of Trust is…the lienholder can take the home more easily and more quickly…but ONLY if they agree to not pursue the homeowner for the difference between what is owed and what the bank eventually gets from a 3rd party, not what they buy it back for at the Trustee Sale).

There is reinforcement of this basic principal via a WA Statute…but the basis lies in that Deed of Trust. The confusion begins and ends with more than one lienholder and more than one Deed of Trust. If there is only a first mortgage, there is no confusion. If there is a 2nd mortgage, then there are two Deeds of Trust. The gray area on the 2nd is when the 1st lien holder forecloses leaving the 2nd out in the cold. There is only one case of record on this, and the 1st and 2nd lienholders were not the same entity.

But where there is only one Deed of Trust and one lienholder who is given the right to proceed without judicial process in 4 months time, it is clear that forgiveness of the difference is granted…at time of purchase…not at time of sale.

New gray area…what if you do a short sale instead of letting it go through the non-judicial process? Do you lose your rights under the Deed of Trust by making it even easier for the bank? Likely yes. I don’t believe there are any cases on record that would answer this question.

RE:ARDELL @ 33 – Ah…I am talking about the term “forgiveness of debt” in connection with reporting it on your income taxes as there is no deficiency for the bank to come after if a non-judicial foreclosure is used. The Mortgage Forgiveness Debt Relief Act of 2007 makes it a moot problem until after 2012. I am simply saying that since the house is foreclosed in a public auction there is no debt to forgive if the bid is above the debt owed and the fees. I think you are either trying to muddle my reply or are trying to show us how smart you are without dealing at all with the question and answers as presented. Once the public auction is over it does not matter how much the bank loses later in trying to unload the property. They bought at the auction at their bid price. The only thing that matters is the price they paid in that auction which is normally set at the debt plus expenses. If they set a lower price to bid then there may be a forgiven debt. We are not talking about a deficiency.

Makes no sense to me that if the lien holder is owed $300,000 and bids $100,000 when “taking it into inventory” and later sells it for $200,000 as an REO, that the $200,000 difference at auction would be locked in as a taxable forgiveness amount vs the $100,000 they actually lost at time of sale as an REO. That doesn’t mean you are incorrect, but it doesn’t seem fair.

Makes no sense to me that if the lien holder is owed $300,000 and bids $100,000 when “taking it into inventory” and later sells it for $200,000 as an REO, that the $200,000 difference at auction would be locked in as a taxable forgiveness amount vs the $100,000 they actually lost at time of sale as an REO. That doesn’t mean you are incorrect, but it doesn’t seem fair.

It might not be fair, but I think that is how it works. Note though that in practice it probably works the other way more often, at least if they are off by that much. That the bank would bid $200k and only get $100k.

It really has more to do with the agreements signed at time of purchase, than how the bank “bids it” at time of sale. The difference between a Judical and non-Judicial foreclosure is that the buyer signed a Deed of Trust at time of purchase. This makes it unnecessary for the bank to proceed via a Judicial Process, and makes it automatic that the lender can proceed to Trustee Sale (non-judicial foreclosure process) when the owner is 4 months behind in their payments.

The trade off for the stream lined process of moving forward on the delinquent homeowner is the agreement to take what they get and forgive the difference. “What they get” has nothing to do with the bid at the Trustee Sale. What they take it back for is of no consequence. What they get is determined by either a 3rd party purchaser buying it at the Trustee Sale or what the lender eventually gets as an REO sale.

This is really sort of jumbled up. The difference between a deed of trust and mortgage is that a deed of trust can either be non-judicially foreclosed or judicially foreclosed, where a mortgage can only be judicially foreclosed. Both have notes that the borrower is typically liable on, at least prior to the non-judicial foreclosure being completed. So it’s an election made by the creditor at the time of default.

In some states the bank can apparently do a non-judicial foreclosure of a deed of trust and obtain a deficiency judgment. In some states it depends on whether or not the debt is purchase money debt. There are all sorts of different results in different states.

Totally an aside, but Washington used to have a rule that if you obtained your car loan through the auto dealer (even one of those assigned ones through BOA), that the would be no deficiency in the event of default. Washington was the only state with that rule which I’m aware of, but eventually the politicians sold out to the banks.

RE:Pegasus @ 36 – Well, after reading Denninger today, I got to thinking, so follow this thought experiment, if you will. And for the record, I think some of what he writes is purposely inflammatory and designed to spin his viewpoint, so I do not take what he says verbatim at all.

You take out a mortgage from Countrywide. Countrwide is sold to BAC, and either Countrywide or BAC sells your mortgage to Goldman Sachs. Goldman Sachs bundles your mortgage into a mortgage backed security (MBS), and the Federal Reserve, in one of their QE operations, pays Goldman Sachs the face value of the toxic MBS, a collection of underwater mortgages. The Federal Reserve does not ship truckloads of dollars to Goldman Sachs as payment. They do not ship truckloads of gold bars to Goldman Sachs as payment. They merely create a digital entry into Goldman Sachs account with the Fed, that is payment. So everyone has been paid for your home. And the Fed paid with nonsensical nothingness. So to extinguish a debt with nothing implies that the debt was also nothing.

RE:Kary L. Krismer @ 43 – I will send you a digital entry for $1 million dollars. And you will send me your bank accounts and deed to your home. How’s that?

It does get down to what is money. Most folks would agree that paper dollars is money. Gold, too. But a digital entry created out of thin air? I’ll believe it if you do.

It is a great money machine, in that case. I will collect and place into a large bag huge amounts of dog doo, and then sell it to the Fed for billions. The Fed will buy it, because I and other dog doo sellers are on the board of the Fed. We will enforce the belief that the digital entries are real by creating a fictitious bill to balance the entry, and saddling some poor dumb fooks with the bill, which has already been paid, anyway. And we will close schools and let infrasctructure run down because we spent the money on the dog doo.

RE:Kary L. Krismer @ 40 – I agree. They mostly bid closer to what they are owed or exactly what they are owed although they are now starting to figure out that it may cost them more to end up with a REO. Its a public auction and by underbidding they may increase their actual loss. After a non-judicial foreclosure the bank or someone else owns the house so whether they sell at a profit or not would not affect the debt forgiveness. As far as a IRS tax liability in future years, my guess is that the exemption gets extended. If not, one can argue that whether the deed of trust was recourse or not the lender chose to exercise a non-recourse method of foreclosure and so there would be no tax liability as you have no income from cancellation of debt for a homeowner on a non-recourse loan. Worth a try if you are looking at $200,000 in taxable debt forgiveness.

But if the first bids at what they are owed…and there is a 2nd wiped out in the process…what happens on the “forgiveness” of the 2nd should they decide not to pursue their 100% deficiency? The forgiveness only counts the 80% 1st?

RE:Blurtman @ 44 – Hey all those digits are supposed to mean something. I will ask my bank to add a couple of digits to my savings account as it really doesn’t matter that they produce them out of thin air…. It’s the system and you are stuck with it until it implodes.

It does get down to what is money. Most folks would agree that paper dollars is money. Gold, too. But a digital entry created out of thin air? I’ll believe it if you do.

Even back in olden days, when I was going to college, most of the money transferred was done in the form of checks, not physical dollar bills. Having electronic entries instead of checks isn’t that big of a change.

RE:ARDELL @ 46 – The second has the right to pursue all that they are owed. If they get nothing from the foreclosure then they can seek recovery of all that they are owed on an unsecured basis. It is still owed. If they negotiate the loan amount down then they will file a debt forgiveness that the owner is liable for taxes on.

RE:ARDELL @ 46 – RE:Pegasus @ 49 – Ardell has this theory that where the first and second are the same creditor the second would also get wiped out. Unlikely in most situations, but possible.

If that happened, the forgiveness would presumably be the amount of the second if the amount of the first was bid in. Again though, I never did this type of tax accounting.

Assuming the debt was not discharged, then there would be discharge of indebtedness income when the statute of limitations runs, or possibly earlier, as we discussed regarding when the lender is forced by the IRS to send a 1099 because no payments have been received. And that presumably would not be wiped out by the mortgage relief act legislation.

RE:Kary L. Krismer @ 51 – I would think that the only way possible for that to happen is that the bank bids an amount equal to both the first and the second plus costs at the auction. They buy it and then lose their butts later selling the REO and it is too late to remedy what they have done to themselves. Maybe that is where that “theory” is coming from. They bid that amount and they are essentially wiping out anything the homeowner owes. You might see that on older mortgages where there is still some perceived equity. I am thinking anything less and that second is still alive but unsecured. Maybe there is some other obscure control issue? Example. The bank bids only the first mortgage amount hoping to win the auction since they believe the house is worth more than the first and second and they will get to reap the financial gain on the resale of the home and plus go after the money still owed on the second mortgage recovering twice? Kind of far fetched in today’s market.

The rule is to get permission, and to be sure the seller has checked the appropriate boxes to advertise the listing. By advertising the Multiple is addressing when an agent is using another agents listing to get clients. Like advertising a property then listing your phone number as the contact rather than the listing agent.

RE:Kary L. Krismer @ 51 – I would think that the only way possible for that to happen is that the bank bids an amount equal to both the first and the second plus costs at the auction.

I think Ardell has some other theory, but my theory on that would be the application of the “dragnet” clause in the deed of trust. Many deeds of trust say they cover the debt of the note and any other subsequent debt. Arguably the second is a subsequent debt. The case law on the application of the dragnet clause is somewhat restrictive, however, because it’s typically not in the debtor’s advantage in normal times to have seemingly unsecured debt become secured. So most the case law I’ve seen would not support that result.

RE:Kary L. Krismer @ 50 – Ya.. you have to prove you have a zero or negative net worth at the time of the foreclosure. Can you exclude certain assets like a vehicle, furniture, etc?

Again, not my area, but for many people proving insolvency wouldn’t be that difficult.

As of several years ago, it was unclear whether you could exclude exempt assets from the calculation. Not sure if the courts have decided that yet. I believe though that if you say were solvent by only $10,000, that would be the limit of your discharge of indebtedness income.

Proof would be the problem for many. That’s why I think it’s better for the foreclosure legislation to stay in place. If something happens as the result of a foreclosure that’s easy to prove. Solvency may not be.

y advertising the Multiple is addressing when an agent is using another agents listing to get clients. Like advertising a property then listing your phone number as the contact rather than the listing agent.

Again, the NWMLS sometimes takes rather expansive interpretations of their rules, so I wouldn’t be so sure it’s so limited. Even so limited, arguably you posted that link so that someone would call you to show it. I know that’s not why you did that, but that’s what they could say.

RE:Kary L. Krismer @ 57 – Not sure about that foreclosure legislation. I agree that no one going through a forced foreclosure should have a tax liability for what the bankers are still owed but many are choosing to do strategic defaults and those I feel should pay the loans off or pay the taxes on the debt forgiveness. A insolvency hoop would at least expose many that should be paying. Maybe a law rewrite with a net worth maximum clause to get the free tax ride.

RE:David Losh @ 55 – That’s the problem David. You can get and pay for advice from many attorneys and accountants and still end up with the wrong answers. You end up in the same place only poorer but you had fun paying them.

RE:Kary L. Krismer @ 48 – But was there not something behind the checks you received for the mime performances? ;>)

So there are at least two issues: Corruption at the Fed as they are paying face value for crap, while the recipients of the monies are on the board of the Fed. Neil Bush skirted jail time for similar crimes at Silverado S&L, so perhaps the banksters found a better way to execute this scam. The other is the “realness” of the electronic payment.

Imagine if you were on the Faber College entertainment committee and you also owned a concert promotion company, and you billed Faber beaucoup bucks for a Jimi Hendrix concert that did not actually feature Jimi Hendrix, and you authorized full payment to your concert promotion company as a committee member.

Well Kary that is one of the advantages of being an old timer, like me.

I remember the days when we would make little tiny ads to put in the newspaper to get the phone to ring. Most of the time the property we advertised weren’t our own. We looked for the cheapest properties to get people to call. Many listing agents targeted that market segment specifically to have that inventory to sell. They didn’t like us upstaging them with our glamorous advertising budgets.

Those days went away a long time ago. People called is bait, and switch. As gardener1 pointed out, at a half a million dollars this is a different kind of price opinion.